In a struggle to be happy and free

Drystone Wall

Category: money Page 2 of 8


20110331_youtube_logoYouTube has become such a fixture that I find my familiarity with it has me forget how remarkable it is.

Users upload more than 24 hours of video every second. They must have one hell of a server farm to hold it all.

Initially, videos were only available at a resolution of 320×240. Over time, the site increased the maximum resolution and added support for the 16×9 aspect ratio. Today, even 4k videos (4096×3072) are supported.

Steve Chen, Chad Hurley, and Jawed Karim formed YouTube in February 2005. They met each other while they worked together at PayPal. Just 22 months after it was founded, in November 2006, Google bought YouTube for $1.65 billion.

The founders certain had no guarantee YouTube would be a success, much less the de facto Internet video site, but they’ve certainly been rewarded for their entrepreneurial spirit and hard work. They each earned the equivalent of $859,375 per day, from the time they founded the company until Google bought it. Not a bad take!

The debt left behind

Last year I paid off my government debt. I now have more news.

Due to some good fortune, I stand before you entirely debt-free. No credit card debt, no line of credit debt, no Canada Revenue debt, no car loan debt … no debt whatsoever. And no, I didn’t win the lottery. I’d be in a very different frame of mind had that happened.

I’m pleased, but in a more detached way. I think there are two reasons. The first is that I’ve made stupid decisions and carried debt for so long that I’ve grown used to it. There’s no huge relief. The second is that I’m old enough now that I can’t just go and spend money on whatever I want. I don’t have the time to loosen my purse-strings much because I need to think about retirement. I don’t want to be poor in my old age. Because I’m going to do the responsible thing, my disposable income will not really change.

I didn’t think that I’d be lighting cigars with $100 bills, but I was expecting to feel a financial freedom that’s long been absent. The reason I don’t feel that way is because I’m old enough to know better. It reminds me of a line from the film Memphis Belle. After they drop their bombs and plot a course for home, the pilot tells his crew, “Okay men, we’ve done our duty for Uncle Sam … now we’re flying for ourselves.” Similarly, I’ve paid my debts and although I’m still paying, I’m now paying myself.

It’s not the feeling I expected, but it’s a good feeling anyway.

I’m in the wrong line of work!

I logged into one of my banks today and noted a message explaining that some charges would be changing in June. I followed the link, fully expecting to see increases across the board. I was wrong. They’re reducing a few fees. A few … and they put those ones right up front, too.

I noted that my credit card interest rate is increasing from 11.90% to 11.99%. Seriously? It’s not a big change, but I wonder what they would say if you asked them why. That the interest rates are climbing? That’s true, but when the rates fell, the credit card interest rate didn’t fall. When I got the card, the rate was 8% and it’s never gone down. I’m not terribly upset about this latest increase because since paying it off in August, I’ve used it exactly twice, and both times I paid the balance upon receiving the bill. I’ll be cancelling the card in the next year and they’ll certainly get no interest out of me in the meantime.

My primary bank doesn’t offer a fixed low-rate card so my card with them is currently at 19.75%. I was initially uncomfortable with the rate but I soon got used to it. Why? Because I haven’t paid interest on any purchases since I got the card a few years ago.

They’re reporting record profits despite the economic downturn, but I’m through with helping the banks make even more with their usurious credit card rates.

Obama’s budget

According to the CBC article, “Obama’s budget includes record deficit,” Obama’s proposed budget will increase the United States government’s deficit from last year’s $1.41 trillion to $1.56 trillion. It’s just 0.15 more, right? Yea,and that $0.15 trillion happens to equal $150 billion dollars. It doesn’t seem so small when expressed this way, does it?

Keeping that in mind, this is the real kicker:

Obama blamed the previous administration and Congress for fiscal mismanagement, saying that on the day he entered office he was already contending with a $1.3‑trillion deficit.

He’s freezing spending on many programs, but despite this, the deficit will have increased by $260 billion since he took office. At this rate, he’ll rack up another $1.04 trillion by the end of his term if he maintains the current spending levels.

So how is his fiscal management so much better than the previous administration’s, exactly?

I don’t expect that he will maintain this level of spending, but to accuse the previous administration of mismanagement when he added to the deficit, seems more than a little disingenuous. We’ll be watching to see what happens to the deficit next year and the year after.

Epic “do as I say, not as I do”

I learned a new term. When a property is deemed ‘underwater,’ it means that the current value is less than what the buyer still owes on it. When a property goes underwater, it makes some business-sense for the owner to simply abandon the property by defaulting, and allowing the lender to take possession of it.

While this might seem like throwing the baby out with the bath water, big investment firms seem to have no qualms about the tactic when it gives them an advantage. The Huffington Post reports,

a group led by Tishman Speyer Properties gave up the 56-building, 11,232-unit Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan, turning the properties over to its creditors after defaulting on some $4.4 billion in debt. The group decided to “transfer control and operation of the property…to the lenders,” it told the Wall Street Journal. The $5.4 billion acquisition in 2006 was the single biggest residential property purchase in U.S. history.

It’s now worth an estimated $1.8 billion, putting the properties’ owners “underwater.”

In this context, “transfer control and operation of the property…to the lenders” simply means they decided to stop paying and default on their debt. The firm owed nearly 2½ times what the properties are worth so I can see the logic. So can Brent T. White, a law professor at the University of Arizona. He says,

there is in fact a huge financial upside to strategic default for seriously underwater homeowners — an upside that is routinely ignored by the media, credit counseling agencies, and other political and economic institutions in ‘informing’ homeowners about the consequences of default.

But it’s worse than that. It’s not that home owners are not told of the up-side to abandoning underwater properties, they’re actively dissuaded. Hank Paulson, former U.S. Treasury Secretary said,

And let me emphasize, any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator — and one who is not honoring his obligations.

And John Courson, head of the Mortgage Bankers Association,

What about the message they will send to their family and their kids and their friends?

Of course the business community doesn’t care one whit for such arguments, though they’re quick to use them on the average Joe. Investors will walk away without a second thought, but if homeowners do the same thing, it’s suddenly a moral transgression. Perhaps this is because those same investors with holdings in financial institutions will suffer if the general public starts to use the investors’ tactics?

No wonder the economy is such a mess.

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